- HEADLINES: Chicago soy sinks on falling Brazilian export premiums; Midday GFS weather forecast drier for Argentina/S Brazil; North African dryness supports wheat.
- Chicago grains are mixed at midday with soy/corn lower with wheat futures posting modest gains. The selling accelerated in soybeans/soyoil on sagging Brazilian soybean export premiums and weaker D4/D6 RIN values as US renewable diesel capacity dramatically grows. The massive Philipps 66 Rodeo, CA plant will soon be fully operational which adds to the supply of D4/D6 RINs, but the plant also demands a massive new supply of feedstocks. Note that falling D4 RIN values harms industry profitability, but the soyoil market is caught between sagging margins and the massive new domestic demand. Sagging soyoil and rising carbon credits offer a profitable margin for renewable diesel producers. And the $1/gallon blenders credit is holding biodiesel margins in the green. The demand story for US green fuels is growing and a new SAF plant opened yesterday in Georgia.
- Brazilian soybean premiums are down another 4-8 cents due to lacklustre demand and the growing harvest supply. The drop of Brazilian premiums suggests confidence that the 2024 Brazilian soybean crop is not under 140 million mt. Brazilian farmers are selling soybeans to crushers due to better bids.
- Chicago brokers estimate that managed money has sold 6,900 contracts of soybeans, 4,300 contracts of soyoil, and 2,200 contracts of soymeal. In the grains, funds have sold 2,600 contracts of corn and bought 1,200 contracts of wheat.
- The USDA reported that for the week ending January 18 the US sold 16.6 million bu of wheat, 37.6 million bu of corn, and 20.6 million bu of soybeans. The soybean sales were on the light side, but corn/wheat were at expectations. For their respective crop years to date, the US has sold 608 million bu of wheat (up 19 million or 3% from last year), 1,278 million bu of corn (up 333 million or 35% from last year), and 1,395 million bu of soybeans (down 312 million or 18%). The US shipped out 41.1 million bu of US soybeans last week. The US corn, soybean and wheat sales pace is on track to reach the WASDE forecast.
- Parana’s DERAL dropped their state soybean crop forecast from 21.7 million mt to 19.2 million in a report released this morning. The prior DERAL crop forecast was offered at the end of December. And Mato Grosso soybean yields are also holding well below last year and are down 10-15% in even some of the better crop areas. Chicago has been trading a Brazilian soybean crop of 150 million mt, which may be a touch high. However, confidence is growing that January rains have helped late seeded soybeans and prevented a crop less than 140 million mt.
- North African wheat dryness is worsening and underpinning world wheat values on potential demand. Chicago and Paris futures were higher at midday on the prospect that Morocco, Algeria, and Egypt could import record tonnages of EU/Russian wheat.
- The midday GFS weather forecast is drier than the overnight forecast with limited rainfall for Argentina over the next 10-14 days. Temperatures are forecast to be hot in the 90’s/lower 100’s with searing heat forecast for much of next week. The heat/dryness is rapidly curtailing soil moisture across Argentina and far southern Brazil. Unfortunately, the extended range forecast offers limited rain into mid-February and concern for Argentine crop yields are likely grow. And remember that RGDS in Southern Brazil is also a significant soybean producer, and that has to be closely followed.
- Daily showers will fall across Northern Brazil with 10-day totals of 4-9.00”. Cool temperatures prevail across Northern and Eastern Brazil with highs in the mid 70’s to the mid 80’s.
- Chicago choppiness prevails. Wheat is the first Chicago grain to bottom with a smaller N Africa and EU harvest ahead while corn is finding end user pricing on breaks. March soybeans are closely following Brazilian export premiums and Argentine weather forecasts. Today the market is focused on falling Brazilian soy export basis as the harvest advances. Friday should feature a bounce on hot/dry Argentine/S Brazilian weather.